The American flag and the scales of justice

3 top takeaways as the DOJ takes on commissions 

The newest statement from the Department of Justice focuses on one MLS settlement in a specific case but could be a blueprint for the industry as a whole.

February 17, 2024
3 minutes

Key points:

  • Increased competition for commission fees appears to be the main goal.
  • The DOJ is against the current system of splitting fees, but suggests that some aspects could remain in place.
  • Whatever changes are coming, one analyst believes it won’t mean the disappearance of buyer brokerages and multiple listing services.

With all the buyer agent commission lawsuits stirring up uncertainty in the industry, one looming question — where the Department of Justice stands — has been at least partially answered by a Feb. 15 court filing.

The statement of interest filed for the Nosalek case in Massachusetts provided a possible blueprint for changes the DOJ would seek if it takes on the compensation structure of the industry as a whole. And that's not a hypothetical scenario: The Justice Department is currently waiting to hear from the U.S. District Court of Appeals about whether it can reopen its case against the National Association of Realtors.

The most significant potential change the DOJ might seek is an injunction to prohibit sellers from making commission offers to buyer brokers, something it suggested for the proposed MLS PIN settlement in the Nosalek case. That would be a big change, although some workarounds could take place.

Here are three key takeaways from the DOJ's filing:

Competition is a priority and could encourage commission alternatives

It's become clear that the DOJ wants to do what it can to insert price competition on the buyer brokerage side of the deal, said Russ Cofano, CEO of Collabra Technology. Cofano also has served as an attorney and industry legal counsel.

"None of this is unexpected, but at least now we know with some certainty," Cofano said in an email, which was also posted on his LinkedIn account.

There was plenty devoted to the topic of competition in the 38-page document submitted by Jessica Leal of the DOJ's antitrust division. 

The filing went into some detail about what kind of competition could result from the change, including agents charging flat fees or hourly rates instead of percentage commissions. The DOJ wrote at length about how commission fees have remained in the 5-6% range for so long despite all the technology-driven changes to the homebuying and selling process.

Sellers could still pay buyer broker fees — but not like they do now

While the DOJ doesn't like the current system of listing agents offering to split the compensation with the buyer agent, it doesn't appear to be against sellers reimbursing buyers for buyer-broker fees. 

"While some buyers might choose to pay their buyer brokers out of pocket, other buyers might request in an offer that the seller pay a specified amount to the buyer broker from the proceeds of the home sale," the DOJ filing stated. "Thus, the current practice could continue, where the seller factors the commissions into the offer the seller is willing to accept."

The difference, Cofano points out, is that part of the sales transaction would come after the buyer-broker commission amount was negotiated between the buyer and their agent.

DOJ is eyeing change, but not a complete overhaul

After looking through the filing, Cofano believes that if the DOJ eventually gets its way at an industry level, key pieces like MLS or buyer brokerages are not going away because they will remain immensely important parts of the industry.

In fact, he sees MLSs as playing a vital role in facilitating an efficient and cooperative marketplace that allows sellers and buyers to independently negotiate their agents' fees.

"Yes, the industry is going to change in material ways, some we can anticipate and some we cannot," Cofano said.

If the DOJ were to succeed, it would also take quite a bit of time for changes to happen. The Sitzer/Burnett case, for example, took over four years to bring about a verdict, and that is expected to be appealed.

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